04/22/11 Buenos Aires, Argentina – There’s a currency I think of as the “anti-dollar” that continues to appreciate against the US dollar.
Unlike gold, the “anti dollar” can be used to maximize other investments. I’ll reveal this currency in a moment.
But first, why would you want an “anti-dollar” in the first place?
The US has a multi-decade history of borrow and spend. Worse than that, it’s more extreme today than ever before. The government has to borrow about half of what it spends. And policy makers are printing money like crazy to “stimulate” the economy (even if they do give it fancy names like “quantitative easing”).
If there is more money but the same amount of things to buy with it, prices of the things go up, measured in money. This is inflation, and it shows up in different places at different times. Whether its food, gasoline or house prices.
This might sound a bit weird at first, but money has a price like everything else. Looked at in reverse, inflation means the “price” of money has gone down, when measured in “things.” Money has lost value. It buys less.
One way to protect yourself from inflation is to have investments in stronger currencies. These can be held as cash, bonds, stocks, or real estate. Where I live in Argentina, the locals keep their savings in dollars, because they keep their value better than Argentine pesos. Everything’s relative. But there are much stronger currencies than the US dollar.
One such strong currency is the Singapore dollar (SGD).
A hedge fund trader who is a friend of mine recently described it to me as an “Asian version of the Swiss Franc”. This is a big compliment. Switzerland’s currency has been strong for decades, and is well known as a safe haven in times of trouble.
The reason that Switzerland, and now Singapore, have strong currencies is that these countries live within their means. While the US borrows and spends, these countries earn and save. This is how people get rich, and it’s the same for countries. No one got rich by spending money faster than they earned it.
In 2009, Singapore’s current account balance – the net money coming into or going out of the country – was a surplus of $26 billion. That was just behind Saudi Arabia, the world’s biggest oil exporter. By comparison, the US had a deficit of $420 billion!
Singapore has very low external debt. That means it owes very little to people overseas. Again this is the opposite of the US, which owes trillions to places like China, Japan and Saudi Arabia.
And foreign exchange reserves – the country’s rainy day piggy bank – work out at $40,000 for every man, woman and child.
In the future, Singapore has a crucial advantage over Switzerland. Switzerland sits in the middle of the “old continent” of Europe, which looks set for a decade of slow growth and stagnation.
But Singapore sits in the middle of Asia – in fact right on some of the busiest shipping lanes in the world. And Asia is home to 60% of the world’s population, and with many decades of fast economic growth ahead of it.
This means that over time the Singaporean dollar is likely to gain value against the US dollar. In fact over the past five years it’s gained over 23% in value, measured in US dollars.
That’s a really useful kicker to any type of investment. So I’m on the hunt for ways to profit from the Singaporean “anti-dollar”. You should be, too.
Regards,
Rob Marstrand
for The Daily Reckoning
Rob Marstrand
Rob Marstrand worked for UBS for 15 years, mainly in corporate strategy, before escaping the banking world and moving to South America. His ex-employer was the largest global wealth manager and world's biggest stock trader. The strategy job involved all areas of the business in all parts of the world. Reviewing current businesses, developing entry strategies for new businesses and countries, and working on acquisitions and joint ventures. This work involved detailed review and valuation of competitors and takeover targets. Rob lived in Hong Kong, China from 2002 to 2005, where he was particularly involved in negotiating joint ventures and acquisitions in China. He has also worked on projects, acquisitions and joint ventures in Japan, India, Saudi Arabia, the US, Switzerland, Indonesia and South Korea, amongst others. He is British, married to an Argentine wife, and emigrated to Buenos Aires, Argentina with his wife and two children in 2008.
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Inflation IS the increase in the supply of money and credit. This monetary phenomenon sometimes leads to higher prices in certain sectors of the economy, which is a side-effect of inflation. It can also be called ‘price inflation,’ but it is a separate event from true inflation. ‘Inflation is, always and everywhere, a monetary phenomenon.’
A 23% ‘gain’ by the SGD against the USD in five years (4.23% pa) is not a real gain at all, rather it is a net loss against annual inflation.
Gold has ‘gained’ over 20% pa, and Silver has accelerated up to 100% pa, thus making the SGD look pathetic; PMs make a far better form of cash than any fiat currency, as many Asians understand already!
FYI: Silver has now risen 160% in just 16 month, this makes me quite happy to not be in the SGD.
True, inflation is a rise in the total quantity of money, of all forms, including credit, however it inevitably cases a rise in the price of goods and services if the money is not destroyed fast enough by consumption or debt default.
An appreciably higher velocity of money could also cause a rise in prices, e.g. when confidence is reduced in a currency.
I am sick and tired of people criticizing America. Stay in Argentina and keep your anti-American comments to your self.
D.
As far as one’s memory could playback, by mid 80s the tigers were still mere sick cats. Initially, has the states’ most favourable trade terms done wonders? The success of the tiger-economies is boyond the descriptions of pen or ink. Their spectacular rise and their quantum ecomomic leap hold us breathless. Their growth, in some instances, simply grown out of proportion or in distorted phenomenon. Chalking up hundreds of billions in foreign reserve. Miracle, mystical stories in the making. Making some wonders if there is a piped-in paper supply directly from DC as privilege facility in accomplishing their task force. It can’t be denied, invariably, the tigers did wonders in dismantling the bamboo curtain and thus facilitated western enterprises to establish their bridgeheads in the olden establishment. Off course, their job was highly rewarded. Later, once established, they could have discarded the piped-in, instead they now have shipments of paper directly from the new territory.
Anywhere, as the relentless printers roar trillions of paper would only end up on par with ordinary office copy.
Many central bankers will be losing huge amounts of money. ..But thats not the end of it. Treasuries would have few economic incentives to be so heavily invested in a market where returns are low and the currency has steadily depreciated over the course of many decades…Others faith in our future also helps explain why that are currently in circulation are in the hands of foreigners — that is unnatural holders who usually dont spend their money here…Under the circumstances what now seems to be a contagious quest for alternatives to the dollar — a budding run on the bank if you will — by policymakers in China as well as in many other countries around the world should not be taken lightly…………..
Why SGD? Have you ever traded USDSGD? Why not yuan?
Mitch said
“Inflation IS the increase in the supply of money and credit.”
Unfortunately, that definition is absolutely incorrect. Here’s a better definition:
Inflation is the increase in the supply of money and credit relative to the supply of goods and services.
An increase in money or credit isn’t inflationary if the supply of goods and services increases commensurately.
Got it?
how do we invest in the Singapore dollar? is there an ETF? please give the symbol and exchange. tried SGD in my trading acct but the system didn’t recognize it.
We Singaporeans are buying gold instead.
In rudimentary economic, money supply increases in tandem with goods and services, commensurately. Or, literally, forget the entire world and go full steam ahead in producing coca-cola for the ensuing inventory would enable money supply to increase correspondingly.
Little doubt, QE exists since Nixon’s era anonymously and it had fueled, provided impetus for the up-and-coming tiger-economies. Notably, in financing the most favourable trade terms. In return, the tigers did not let down disappointingly.
In the ensuing historic moments we had witnessed the economic Blitzkrieg that sent walls cracking one after another as fast as they could be fixed. Admittedly, the tigers were good centre-forwards in the run. Rewards after rewards, sent billions after billions of fiat reserve spiralling north!
Nonetheless, ‘feng shuai’ is perpetually evolutional. The Germans though lightning swift and agile were finally subdued by natural snowy shivering disaster. Importantly, fiat paper dominates a substantial part of life and it attempts to occupy entirely.
Fatally, it has its intrinsic defeat – inflammable and volatile, comes gracefully but could also easily be gone with the trade winds.
Stubborn stains on our clothes may be easily removed with caustic soda. A river of water from Mississipi or Nile or Ganges or Yellow River may not drain a spot off from one’s soul. A little gesture goes a long way. Good or bad deeds propagates socially, simmers among the grassroots, permeates the generations after generations and expires far longer than the Jap’s radioactive substances. The conundrum, good or bad would be finally resolved in the ripe opportune time.